Suit says U.S. Justice Dept.
official hid information
SAN FRANCISCO — A public interest group on Wednesday filed a lawsuit alleging U.S. Deputy Attorney General Larry Thompson engaged in some of the financial chicanery that he has vowed to punish in President Bush’s crusade against corporate crime.
The civil complaint, filed by Judicial Watch Inc. in San Francisco federal court, focuses on Thompson’s role as a director at credit card issuer Providian Financial Corp. from 1997 until his May 2001 confirmation as the second-in-command at the U.S. Justice Department.
Thompson assumed a higher public profile last month when he was appointed as the head of a “financial SWAT team” created to weed out corporate corruption and help restore confidence in the scandal-ridden stock market.
The new role has focused attention on Thompson’s tenure as chairman of Providian’s audit committee, a part of corporate boards that is supposed to ensure companies issue accurate financial statements.
The lawsuit alleges Thompson ignored his watchdog duties and helped Providian conceal deepening financial troubles that crippled the company and wiped out $15 billion in shareholder wealth during 2001.
The Justice Department described the allegations against Thompson as “frivolous,” and noted that his record as a Providian director had been fully disclosed to the U.S. Senate before his unanimous confirmation.
Thompson’s “actions have been entirely professional and proper at all times and in all respects,” Justice Department spokeswoman Barbara Comstock said.
San Francisco-based Providian brushed off the suit’s allegations as irrelevant because the company is being run by a new management team.
Besides Thompson, the lawsuit names four other former Providian executives and directors — Shailesh Mehta, David Alvarez, James Rowe and David Grissom.
“On the face of it, (Judicial Watch) appears to be using Providian to make a political point,” said Providian spokeswoman Laurel Munson.
The company previously has been hit with several other shareholder lawsuits alleging management covered up its problems during 2001.
Providian’s shares plunged from a 2001 high of $60.91 to as low as $2.01 after management revealed the breadth of its problems last October. Providian’s shares rose 21 cents to close at $4.90 Wednesday on the New York Stock Exchange.
Before Providian’s stock began to plummet, Thompson sold his 89,651 shares during July 2001. Thompson hasn’t publicly disclosed how much he made from those sales.
Providian’s stock price ranged from $46.13 to $59.95 during July 2001. Based on that range, Thompson’s stock sales generated somewhere between $4.1 million and $5.4 million.
The suit alleges Thompson made the sales because he knew Providian’s stock would plunge once management laid out the company’s financial problems. The Justice Department says Thompson ordered his broker to sell his Providian stock to avoid possible conflicts of interest.
“The timing of the sale was related to his confirmation (as deputy attorney general), not any other factor,” Comstock said.
Judicial Watch’s allegations are the latest shot aimed at the past business conduct of Bush and his administration.
In lawsuits filed by Judicial Watch and other critics, Vice President Dick Cheney has been accused of helping Halliburton overstate its revenues while he was chief executive officer of the oil services company. The Securities and Exchange Commission is investigating Halliburton’s accounting practices during Cheney’s tenure as CEO.
President Bush also has come under scrutiny for stock sales that he made while he was a director for Harken Energy Corp.
Judicial Watch said its suit against Thompson illuminates the conflicts facing the Bush administration as it promises to crack down on corporate crime, said Larry Klayman, the Dallas-based group’s chairman.
“The culture in Washington is to look the other way,” Klayman said. “It is always the high and mighty and powerful in Washington that goes free.”
Judicial Watch is suing on behalf of Texas resident Robert Lake, who bought 132.9 shares of Providian stock through a retirement account. Lake is seeking $75,000 in damages.
Although Providian’s stock crashed after Thompson’s departure from the board, Judicial Watch alleges he conspired to help keep the company’s troubles under wraps until he and other insiders could sell their stock.
Now, the suit alleges, Thompson is blocking an investigation into Providian’s troubles — a charge Comstock called “completely baseless.”